Are family businesses better philanthropists?

These days, corporate philanthropy is big business, and companies are giving more and more as part of their corporate social responsibility efforts.

Last year, the Committee Encouraging Corporate Philanthropy – a New York-based philanthropic organization – reported that, in the five-year period from 2008 to 2012, total giving rose by 42% among 240 of the US’s largest companies. And that trend is likely to be mirrored in Europe.

But where do family businesses fit into this giving trend? Do they act differently from their counterparts in the listed sector?

I think they do, and here’s why:

  • Family businesses give more – at least in Germany. That was the conclusion of a recent study by the Munich-based Foundation of Family Businesses. The study was based on a survey of 587 managers of German family and non-family businesses, and it found that nearly 60% of family businesses support charitable activities and foundations, compared with only 44% of non-family businesses.
  • Family businesses don’t tell the world about their philanthropy. Obviously, that’s not because they are giving less, but rather because they are more discreet. This is in contrast to their listed counterparts, who tend to want their giving to be seen so that it can improve their reputation and positively influence their share price.
  • Family businesses tend to be more local in their giving. This is because family businesses are often very firmly entrenched in the community where they began. Many family businesses consider the community to be one of their stakeholders, which means it makes sense for their giving to be local.
  • Family businesses take a more holistic approach to philanthropy, whereby they might include their staff in their giving as well. This theme is discussed well by Professor Guido Corbetta in his earlier blog All in the family. In the blog, he talks about how, for their staff and their families, family businesses often take on the role of the state in the provision of things such as education and health care. This is a form of philanthropy that has the added advantage of raising staff morale and encouraging loyalty.

Of course, many family businesses are also listed, and so they might combine the family business approach with that of the listed sector. Nevertheless, how family businesses approach giving is unique, and it should be appreciated as such.

Peter Englisch, Global Leader, Family Business Center of Excellence, EY

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